UK/Euro Financial Market Daily Morning Briefing 10-11-2006

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London shares lower in early deals, miners and pharma weigh; Wall St  down

Leading shares were lower in early deals, following on from declines on Wall Street and Asian indices overnight amid investor caution over rising oil prices and US election concerns, with UK blue chips weighed down by mining and pharma sectors.
   
At 9.00 am, the FTSE 100 index was 20.4 points lighter at 6,211.1, extending yesterday's decline when the index ended 7.5 points weaker at 6,231.5, while the broader indices also traded lower.
   
Overnight on Wall Street, US stocks closed in the red as investors cashed in profits amid disappointing consumer sentiment data, rising oil prices and new worries about policy shifts in Washington.
   
The lacklustre session was to be expected after three days of gains, including a new closing high on Wednesday for the Dow Jones industrials. Investors had driven stocks broadly higher this week on optimism that the Democrats taking control of Congress would cause political gridlock that would be favourable to businesses.
     
The DJIA closed 73.20 points lower at 12,103.30, while the Nasdaq Composite ended 8.93 points lighter at 2,376.01 and the S&P 500 index finished down 7.35 points at 1,378.35.
   
Meanwhile, across Asia this morning, the mood was also downbeat, with Tokyo's Nikkei 225 index closing down 86.14 points at 16,112.43 and Hong Kong's Hang Seng ending the session off 61.72 points at 18,891.14.
   
Tokyo shares were particularly under pressure after an unexpected decline in core private sector machinery orders for Sept, indicating that Japanese companies have begun to curtail their capital spending amid growing uncertainty over domestic demand, said Junichi Makino, a senior economist at Daiwa Institute of Research.
   
Still in Asia, oil prices eased during Asian trade in a technical pullback but remained around the 61 usd a barrel level on the view OPEC is serious about production cuts.
   
New York's main contract, light sweet crude for Dec delivery, was down 26 cents at 60.90 usd a barrel in Asian trade this morning.
   
In London, corporate news is light compared to recent sessions as markets wind down for the weekend following a flurry of earnings reports earlier in the week.

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Among the fallers, miners weighed after commodity prices retreated in Asian trade, with gold down 2.4 ounces at 634.4 an ounce this morning, sending Vedanta Resources 25 pence lower at 1,472, Antofagasta down 8-1/4 pence at 512-1/2 and Rio Tinto 46 pence weaker at 2,916.
   
The pharma sector was also under pressure after drugmakers' shares dropped in US trade overnight as Democrats officially took control of both houses in the next US Congress, raising fears that the government will seek to negotiate lower drug prices.
   
GlaxoSmithKline was among the main casualties in early deals, dropping 23 pence at 1,363, while AstraZeneca fell back 44 pence at 3,031.
   
Elsewhere, shares in Amvescap continued their decline after a good run earlier on in the week on the back of bid speculation, with the shares dipping 16 pence at 581 this morning.
   
Among broker changes, bearish comment weighed on Smiths Group, 15 pence lighter at 924, after Morgan Stanley downgraded its stance to 'underweight' from 'equal-weight' and cut its target by 8 pct to 900 pence on increased caution regarding the group's margin outlook.
   
In a research note to clients this morning, the broker said it has reduced its operating forecasts for the group by 5 pct, arguing that despite the group's strong top-line growth, it sees 'limited' margin expansion.
   
However, the negative market trend belied several strong performances, with Cairn Energy bucking the downward trend to take on 30 pence at 1,919 after the Daily Mail's Market Report noted revived speculation that India's ONGC could be interested in buying Cairn Energy's Rajasthan assets.
   
Cairn's fellow oil plays BP and Royal Dutch Shell were also in demand on the back of last night's oil price increase, with the former up 0-1/2 pence at 602 and the latter 6 pence stronger at 1,926.
   
M&A news continued to support Scottish Power, 6 pence to the good at 732-1/2 after Spanish peer Iberdrola this morning confirmed it is considering market alternatives and opportunities including Scottish Power, in response to a raft of press reports in the UK and Spain.
   
Still among M&A, ITV was also on the up, rising 0-1/2 pence at 112-1/2, as investors continued to buy into the media group after yesterday's announcement that it has received a "highly tentative" preliminary approach from NTL and is awaiting a firm offer from the cable giant, although ITV highlighted that there are no assurances an offer will be made.
   
And buyers came for J Sainsbury shares, up 3-1/2 pence at 417-1/2, amid market talk of a possible private equity bid.
   
Meanwhile, SABMiller shares were buoyed by its announcement that it is making simultaneous offers for all the voting shares it does not already own in its listed Peruvian subsidiaries UCP Backus y Johnston, Cerveceria San Juan, Compania Cervecera del Sur del Peru, Industrias del Envase, Inmobiliaria Pariachi and Vidrios Planos del Peru.

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Elsewhere, Vodafone Group added 1 pence at 135 as news that Vodafone UK has launched a 25 stg a month broadband and landline package was helped by a JP Morgan upgrade to 'neutral' from 'overweight' ahead of interim results from the mobile phone giant on Nov 14.
   
In a note to clients, the broker said the figures could signal upside to full year 2007 consensus forecasts and the upgrade reflects the generally supportive news flow outlook near term.
   
On the second line, a disappointing trading update from Whatman put the shares under pressure, dropping 25-1/4 pence at 259-3/4, after the life sciences company said its full-year earnings before interest, tax and amortisation are expected to be slightly lower than current market expectations as somewhat slower sales growth will affect its operating margins.
   
The company's profits for the year will be adversely affected by 600,000 stg due to the discovery of an accounting error in the recording of stock in its US operations, Whatman said in a trading statement.
   
Meanwhile, investors took profits in Invensys after yesterday's share price jump on the back of better-than-expected second quarter numbers. This morning Citigroup downgraded the stock to 'hold' from 'buy' on valuation grounds while raising its estimates and target following yesterday's strong results.
   
Among the mid-cap risers, John Laing topped the leaderboard, 12-1/2 pence better at 420-1/2 after German company Allianz said it has not ruled out making a higher offer for the construction specialist after Henderson Infrastructure Holdco said it had raised its takeover bid for the construction specialist to 405 pence per share, valuing it at about 950 mln stg.
   
"We are looking at our options," an Allianz spokeswoman said. At the end of Oct, Allianz made a 385 pence cash per share offer, 30 pence higher than the offer Henderson originally made in Sept of 355 pence per share.
   
Finally, chip makers CSR and Wolfson Microelectronics climbed up 16 pence at 629 and 7 pence at 295-3/4, respectively, as investors came back for the stock after a recent sell-off on the back of CSR's disappointing third-quarter results and fourth-quarter sales warning earlier in the week.

UK Diary of Events

For a diary of key corporate and financial events in the UK today, click here

US Summary

For a summary of US stocks at yesterday's close of trade, click here

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AMSTERDAM - Market data at 10.10 am

Major indices
   
AEX 491.71, down 2.11 points
AMX Midcap 633.12, down 2.32 points
Government bonds unchanged to slightly higher

Major losers
   
Getronics was 2.93 pct lower at 5.96 after strong gains earlier this week
   
Numico dropped 1.32 pct at 38.74 as investors locked in profits after yesterday's surge following third-quarter earnings
   
ING, down 1.1 pct at 33.33, continued yesterday's slide after third-quarter results that were slightly lower than expected, as Rabo Securities lowered its price target to 39 eur from 40
   
Other financials also traded in the red, with Fortis off 0.79 pct at 32.45, Aegon easing 0.62 pct at 14.42 and ABN Amro giving up 0.3 pct at 23.2
   
Wolters Kluwer shed 0.45 pct at 21.90 as both Rabo Securities and Kempen downgraded the publisher to 'hold' from 'buy' after Wednesday's third-quarter results
   
VastNed Offices/Industrial slipped 0.32 pct at 28.42 after reporting slightly lower-than-expected results for the first nine months, while VastNed Retail edged 0.07 pct lower at 68.60, failing to benefit from its raised full-year outlook after in-line results for the first nine months
   
Hunter Douglas shed 1.86 pct at 55.55 as Rabo downgraded the window coverings maker to 'reduce' from 'hold', with the price target cut to 49 eur from 59

Major gainers:
   
TNT added 0.44 pct at 31.75
   
Unilever firmed 0.44 pct at 20.47, Heineken put on 0.41 pct at 36.90
   
Property stocks were in focus, with Eurocommercial Properties 0.4 pct higher at 37.35 after reporting a 10 pct increase in its first-quarter direct investment result. Corio climbed 1.07 pct at 56.90, Wereldhave gained 0.38 pct at 93.60

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German shares market data at 9.16 am

Major indices:

DAX down 0.33 pct or 21.10 points at 6,337.58
MDAX down 0.24 pct or 21.52 at 8,800.75
TecDAX flat 0.0 pct or 0.03 at 700.06
Euro/dollar 1.2863 usd up 0.0037

Top DAX risers:

Continental up 0.54 pct or 0.46 at 85.78, CEO says dividend for 2006 to be increased

-SAP up 0.30 pct or 0.48 at 159.55, partner SAP Netweaver acquires minority sake in US firm Visiprise

-Deutsche Boerse up 0.25 pct or 0.31 at 125.51, bargain hunting after sell-off

-RWE up 0.08 pct or 0.06 at 79.11

-MAN AG up 0.08 pct or 0.06 at 71.59

Top DAX fallers:

-Deutsche Telekom down 1.11 pct or 0.15 at 13.32, Q3 results burdened by domestic competition

-Adidas down 0.87 pct or 0.33 at 37.74, continuation of sell-off after third quarter results

-Henkel down 0.77 pct or 0.82 at 106.00, profit taking

-Deutsche Lufthansa down 0.76 pct or 0.14 at 18.40, rising oil prices

-Daimlerchrysler down 0.80 pct or 0.37 at 45.70

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PARIS - Market data at 9.55 am:

Major indices:
   
CAC-40 down 23.43 points or 0.43 pct at 5,425.17
SBF-80 down 19.36 points or 0.30 pct at 6,463.86
SBF-120 down 15.35 points or 0.39 pct at 3,953.17

Volume: 401 mln eur
   
33 CAC-40 stocks down
6 CAC-40 stocks up
1 CAC-40 stock unchanged
       
Major losers:
  
Hermes International down 2.30 eur or 2.59 pct at 86.55 following Q3 sales below consensus
   
Eutelsat down 0.40 eur or 2.68 pct after a Goldman Sachs' downgrade to sell
   
Alcatel, down 0.16 eur or 1.44 pct at 10.26 on profit taking
  
Major gainers:
   
Rhodia was up 0.06 eur or 2.71 pct at 2.27 eur following Q3 net profit well above analyst expectations
   
Cap Gemini, up 0.10 eur or 0.22 pct at 45.37 eur following falls on Thursday on disappointing results
   
Total, up 0.10 eur or 0.27 pct at 55.75

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